CREA has been involved in the Supply Chain work since its founding in 1995. The term, supply chain, is used to describe the path of raw materials traveling from the mine or field to factories where they are converted to products and then shipped to the company purchasing the products which then sells the products. Years ago, companies such as those with recognized brand names, owned and operated their own factories either in the US or other countries. In the past few decades, jobs have been outsourced, that is, transferred to factories in other countries where the wages and other costs of production are much lower.
While many people are aware of supply chains for clothing (apparel) and footwear, few think about the term supply chain when looking at towels and other home goods, furniture, clothing, cleaning products, in fact anything that we can buy from store shelves or on-line. The truth is that everything we find in the stores, unless produced locally, is produced, manufactured, assembled or refined in factory facilities around the world. A quick geography review can be done by anyone, simply by examining the labels in your clothing for any given day.
The raw materials for a product can come from many parts of the world and then assembled somewhere else before coming to the store from which you purchased it. That pathway the article follows to get to you is called the supply chain. Different products have different supply chains but they all follow a set out path bring raw materials to the point of assembly and then to varying sites for distribution before arriving at the point from which you purchased it.
The Supply Chain – Who and What is Included?
The supply chain includes all of the persons, work sites, resources that are involved in bringing what we find in our stores to us: the producers, processors, traders, transporters and distributers Supply chains have been in existence for decades. What is different today is the breadth of countries, communities and workers that are involved in the supply chain of any given product, and the computer technology that enables companies to keep track of the suppliers, the inventory, and the product ordering.
These changes have led to an increasingly globalized economy, or what is known as “economic globalization.”
What’s involved with producing something? If you are a carpenter, the lumber, nails, tools have to come from some place. And they have to get to you for your use. All of those places and the people who work in them make up the supply chain that is involved with bringing the finished product to market. The same is true of any product any place in the world. Supply chains can be local, they can be national or they can be international. The point is that everything comes from some place, and there are real companies and real people involved in producing it.
The Role of Cost
In the past, the supply chain that a business used might have been part of the business itself, or else was as local as possible. Businesses knew their suppliers, and in many instances had long-term relationships with them. These relationships sustained the businesses. In the globalized economy the main issue is cost, so the long-term relationship and the associated guaranteeing of business have, in many if not most, instances disappeared. As the years have gone on, and the internet has made more and more available on-line, the bidding on contracts has become an anonymous process, with bidding taking place on line and personal relationship almost if not totally disappearing. The only issue is cost.
Today what we see is the combining of the supply chains with a system of out-sourcing that continually pushes for the lowest costs. What does this mean? What we have is a system of out-sourcing as much as possible, because with that out-sourcing of jobs comes the out-sourcing of responsibility for the workers. In a sense, workers have become a commodity in the global economy. By out-sourcing any part of production or the supplying of a service, all the costs associated with that good or service are no longer the responsibility of the company.
For example, in the past, a company that produces athletic shoes would negotiate a price with its suppliers or factories producing it, to get the best quality for the best price for the shoe’s production. Now, because there is so much competition, the buyer walks in and says this is what I’m willing to pay. If the factory wants the work, it has to agree to that price. If not, other suppliers will step in and do the work for that price. This makes it extremely difficult for factories to compete.
Then the producer or the supplier, no matter the product, has to decide whether or not he or she wants the contract. If they want the contract, because they have to stay in business, they have to figure out how to produce the item for the amount the purchaser is willing to pay. The question of where to squeeze lower production costs becomes paramount.
Lower production costs can come from a number of places:
- Workers can be paid less, or pushed to produce more in the same amount of time.
- The suppliers themselves search for cheaper sources of raw materials.
- Occupational health and safety standards can be set aside to “speed up” rate of production.
- Workers can be denied overtime
- Workers can be forced to work “off the clock”
This downward spiral results from the search for lower costs of production. In a sense there is a shifting of power, of who is determining what the cost of production is.
For the worker at the bottom of the supply chain, the issue of power is very real. How much control does the worker have over his/her situation? Often the worker comes from areas of extreme poverty, and has many people dependent on her/him. When many others could take the workers’ place, the employer has much power and can fire workers without worrying about getting a replacement. It is a very difficult bind for the worker, and in most cases the worker will continue to work no matter what happens.
Power is the ability to control the actions of other people or groups. This power is often expressed in decision-making processes that affect those other people or groups.
Power often exists because of the legitimate possession of authority, as in responsible adults who have been given charge over children, or police who are stopping criminal behavior. Such power can also exist through a person’s position in any given setting, as in a hospital or an educational institution.
One person or group may have power as a result of wealth, the means to provide others with the material goods that they want, or to withhold those goods.
Others may have this power because of physical strength, either personal strength or the combined strength of police, gangs or armies. The schoolyard bully, or abusive gangs are examples of this kind of power. The waging of war is the extreme use of power, and its undertaking is an extremely serious action because of the potential for wide-spread loss of life and property.
Still others may have this power through ownership of media, using its power to influence and convince its audience to think and act the way the owners want. Corporate ownership of U.S. television networks are examples of this, as one can see from their differing approaches to news about current events.
Or the power may come in the political process, during which legislation is enacted that determines rules, regulations, and distribution of tax moneys. When personal or corporate wealth has been used to support particular candidates for political office, those contributors have influence or power over the decisions of the legislators or administrators of government
Often power is held in more than one of the above categories. Power often comes from wealth. That wealth may also be the means whereby personal or corporate power is extended to political power, through election campaign contributions, or bribes. Political power is connected to the use of combined physical power, in the police or in the military. Political power may also be used to stifle views of those who disagree with policies or actions of the government, and often the media is enlisted to mock or ridicule the dissenting views.
In some countries the combination of wealth, political influence, and control of the military can create deadly situations when workers try to speak up for their rights.
Worker power comes from the ability to organize and engage in collective bargaining. Worker Groups, when led by democratically elected leaders, allow the individual power that each worker has to accumulate with the power that other workers have. Unions, as worker groups are usually called, are therefore the means through which workers can meet with management in some semblance of balance of power to ensure that the rights of workers are protected.
CREA has been involved in various aspects of supply chain work from the time of its founding. Over the years various aspects of the reality of supply chains and how they impact workers, their families and communities as well as all of us around the world have been in the media. The spectrum of supply chain related issues includes, but is not limited to:
- Human rights
- Labor rights
- Impact on local communities
- Rights of women
- Forced labor
- Child labor
- Prices in the stores
- Tax bases for community development
as well as many other issues. Some of the issues described in this section on supply chains connect directly to the Corporate Responsibility Work as well as the Sustainable Community work. There are many links in the information provided to other sections of the CREA website. However feel free to suggest others as you see how the work is integrated.